CBIC Clarification on Evidence for Reversal of Input Tax Credit: Certificates by CA/CMA”
The Central Board of Indirect Taxes and Customs (CBIC) has introduced a mechanism to ensure compliance with Section 15(3)(b)(ii) of the CGST Act, 2017 concerning discounts offered through tax credit notes by suppliers after supply has occurred.
In response to representations from trade and field formations, CBIC addressed the challenge of verifying whether recipients have appropriately reversed input tax credit related to such discounts. Currently, no system functionality exists on the common portal for suppliers or tax officers to verify this reversal.
Accordingly, CBIC clarified that suppliers may exclude discounts from taxable supply value if recipients fulfill conditions specified in Section 15(3)(b) of the CGST Act, including the reversal of input tax credit attributable to the discount. Until a portal functionality is developed for verification, suppliers are advised to obtain certificates from recipients, issued by Chartered Accountants (CA) or Cost Accountants (CMA). These certificates serve as admissible evidence confirming the requisite reversal of input tax credit by recipients.
CBIC emphasized that such certificates or recipient undertakings are crucial for compliance during scrutiny, audit, or investigative proceedings. Even for past periods, suppliers must provide these documents to tax authorities as evidence of compliance with Section 15(3)(b)(ii) for credit notes issued post-sale.
This initiative aims to streamline verification processes and ensure transparency in tax compliance related to discounts on tax credit notes under GST regulations.
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